Next Generation Cloud Treasury Services: What Corporates Should Know

gtnews: There’s been a great deal of buzz surrounding the next generation of cloud treasury systems. What business impact and benefits can we expect them to offer?

Peter Lang:
We believe there are several. Even decentralized treasury groups can achieve easier centralized access to all global bank accounts and treasury transactions. Treasurers can also attain cost savings with next generation capabilities, as there is less need for corporate IT involvement/expense. Next generation treasury systems also allow for faster deployments, force banks to compete for your business, and enable greater integrated services and compliance – Office of Foreign Assets Control (OFAC), FinCEN Form 114 (aka FBAR) and enterprise resource planning (ERP) integration – as the service model is very flexible in the cloud.

gtnews: What do treasury executives need to know about these systems that they are likely unaware of right now?

First off, they need to know they are secure. There’s a misconception that cloud systems cause greater exposure for corporations in terms of data and intrusion versus their own on-premise installations. But the truth is, two factor authentication, firewall configurations and strong support agreements – all of these things are totally managed in the cloud.

Next, corporates need to be assured that they are the lowest cost and fastest to implement new capabilities, compared to other models. Since this is Software-as-a-Service (SaaS), no installed workstation will be able to compete on cost/benefit terms.

They also need to know the built-in benefits of the cloud – things they would otherwise have to pay for, such as geographic failover and disaster recovery, value-added services for things like FX deals and settlement, compliance, data archiving, advanced reporting and even using their own internal logins versus creating all new ones for the system.

Lastly, they should be confident in the knowledge that cloud enables mid-cap companies to have the same or better capabilities than large, established corporations for a much lower cost. This should be viewed as a competitive advantage to make treasury more of a revenue center by effectively scaling to new markets and using better liquidity management, global payment, foreign exchange (FX) and bank account tools.

gtnews: What new next generation capabilities and models are emerging?

Lang: So for models, again we point to subscriptions and pay as you go rather than buying licenses. And since they are cloud, they are not hosted on premise but still interact with the customers’ internal ERP systems seamlessly.

In terms of capabilities, having things like rules-based payments (least cost routing), electronic bank account management (eBAM), payment workflow routing and advanced metrics for exposure management all in one place are key.

On the user interface side, we see more and more corporate users using tablets and smartphones rather than just their installed desktops. So rendering on multiple devices is key.

gtnews: What differentiates the best cloud models?

Well first off, we must be clear about true cloud versus most models out there. If the provider has to install their own servers, manage things like failover, create their own identity management tools, it’s not really cloud. There are really only three major cloud providers: Microsoft Azure, Google and Amazon. Most of the others use data center rack vendors like Rackspace, or localized data centres that have to build out the failover capabilities piece by piece. So I would look for one that is true cloud.

Secondly, I think the best cloud services are just that—services. Gone are the days when you had to buy a seat license or buy licensing to a product. The new models are subscriptions where the customer can select which modules to turn on or off as they see value. They aren’t locked into multi-year contracts for modules they never will use.

Lastly, cloud offers the ability to connect as a service on behalf of the customer to many things they would otherwise have to build separate connections for. FX, Bloomberg, Reuters, ATTUS Watchdog for terror watch lists, and key bank routing and identifier information via SWIFT are all cloud-available services now. This takes a lot of complexity and cost out of corporate treasury to have to set up and manage all those things themselves.

gtnews: Is an existing ERP system a problem?

There are a few misconceptions when it comes to corporations with existing ERPs such as Oracle, SAP and PeopleSoft that somehow those need to be replaced or that cloud treasury systems will be hard to integrate with them. Actually it’s much easier than if they were to install a treasury workstation on their own network.

The cloud systems manage the output of the ERP system, convert it to SWIFT or other formats, send to counterparties, and then reconvert the SWIFT formatted confirmations and statements back into whatever the ERP needs them to be. Then it’s more of a file transfer process versus an integration. In addition, if a customer wants to use their ERP for accounts payable as most do, but they still want visibility to those transactions within treasury, that’s built in. So we’re not replacing the systems of record, just augmenting treasury with their key capabilities and allowing them to see all the financial traffic into and out of the corporation through a single interface.

gtnews: Is native integration with SWIFTNet essential?

It’s not essential, although certainly it is very helpful. For example, if a company has more than say, five banking partners, it makes sense to look at a single SWIFT connection that is now available on the cloud via Alliance LITE 2, versus connecting separately to all the banks. This results in a standardized format, plus cuts out the treasury or their IT staff from having to manage say, a file transfer protocol (FTP) connection to Bank of America, a virtual private network (VPN) to JPMorgan Chase, and coordinate all those formats, including timing of statements, on their own.

With SWIFT, that’s all built in. They make one connection in most cases and the cloud system manages all the routing, uploads and downloads in one place. Plus advanced capabilities like eBAM, Legal Entity Identifier (LEI), and other services make SWIFT much more vital than most companies realise. To truly leverage treasury as a strategic part of the financial chain, SWIFT is extremely beneficial. But there are value-added alternatives too, like Fed Global ACH, which we also support.


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